HOT TOPICS:

Editorial: Trickle-down taxation adds up

Pioneer Press

Posted:
01/29/2013 12:01:00 AM CST

Updated:
01/29/2013 06:21:17 PM CST

As the debate about winners and losers continues after Gov. Mark Dayton's budget proposal, some Minnesota city and county governments could join the "win" column -- with a potential windfall amounting to millions.

But that "win" would come at a price, especially to business-tax payers, and to others as well.

St. Paul and Ramsey County could be among those benefiting from a "trickle-down" effect of Gov. Mark Dayton's proposal for a broader state sales tax, a report this week suggests. Until now, little attention had been paid to this effect of the proposal among cities and counties with sales taxes that "piggyback" on the state sales tax.

We want St. Paul and Ramsey County to receive their fair share of tax revenues, but lawmakers should take note: Piggy-backing city/county taxes would produce an even larger tax increase than the governor proposes.

"Early estimates by the Minnesota Department of Revenue provided to the Associated Press show that cities and counties with their own sales taxes could expect to take in 60 percent more than they take in now," the report said. "Counties would be in line for $79 million more in 2014; cities with extra sales taxes would gain a combined $60 million."

The governor's proposal would tax more goods and services, both for consumers and businesses, while reducing the rate from 6.875 percent to 5.5 percent.

Advertisement

As the proposal now is structured, the local sales taxes would remain at their current rates, but would apply to everything the state considers taxable, according to the report.

Under the proposal, consumers would pay sales tax on such now-exempt goods and services as clothing priced more than $100, haircuts and car repairs. The business-to-business sales tax proposal, generating significant pushback, would amount to a several-billion-dollar tax increase on businesses by taxing legal, advertising, accounting and other such services.

St. Paul levies a half-percent sales tax for RiverCentre and Xcel Energy Center bond repayment and for its Sales Tax Revitalization (STAR) Program for neighborhood and cultural programs and projects.

The office of Mayor Chris Coleman is taking a guarded approach on what the added revenue might mean for the city. "We're moving at the speed of the Legislature," monitoring the proposal as it moves forward, spokesman Joe Campbell told us.

The "impact would be sizable," he said, but it's too early to speculate about specifics.

According to House Research, the $16.4 million collected by the city in 2011 would have grown by $10.2 million under the plan. Ramsey County is among five metro area counties with a regional sales tax of a 0.25 percent for transit-system improvements. The $96.8 million collected in 2011 would have grown by $60.5 million.

And what's more, the governor's proposal would double the transit-related sales tax to 0.5 percent in five metro counties and initiate a 0.25 percent tax in Scott and Carver counties. We've expressed concern that the transit system of the future be built to enhance the economic prosperity of the region as a whole, and not Minneapolis over St. Paul and the east metro.

In any case, lawmakers will need to take a careful look at all the consequences of the governor's tax proposals, pyramids and piggybacks and all. As much as cities and counties and every other public entity would like more revenue, every pull on the tax lever has consequences -- and the unintended ones are often lemons.